CITY FOCUS: Hope, resilience and the American dream – the US economic
recovery is gathering pace
ThisIsMoney.co.uk
6 May 2013
By Ruth Sunderland in Boston, Massachusetts
The impromptu memorial that has sprung up near the finishing line of
the Boston Marathon is almost unbearably poignant.
Railings are festooned with battered training shoes, Red Sox regalia,
flowers, candles and American flags. In the spring sunshine, with the
cherry and magnolia trees in glorious bloom, passers-by take a moment
to pause and pay tribute.
Close to the shrine on bustling Boylston Street, retailers responded
to the tragedy with a 25 per cent off sale, in a bid to lure shoppers
and tourists back to their aisles.
It is a reaction that speaks volumes about the resilience of the US
economy. Whatever happens, life, and commerce, must go on: it’s the
American way.
Boston is still in a state of trauma over the Marathon bombings, but
in the affluent centre of the city, it is hard to see scars from the
financial crisis.
Designer shops are packed, even late on a Sunday afternoon, as
shoppers cruise the aisles laden down with bags.
Upscale restaurants and bars are packed, with the clientele spilling
on to the streets.
Thanks to the presence of elite universities Harvard and MIT, Boston
and its environs are a hotbed for fast-growth companies.
They include Good Start Genetics, co-founded in 2007 by the insanely
youthful-looking Greg Porreca, who has a PhD in genetics from Harvard.
The company, based just across the Charles River in Cambridge, has
developed technology for advanced DNA sequencing that can spot
mutations to identify people who are carriers for diseases like cystic
fibrosis. It is `growing like crazy’, according to its chief executive
Don Hardison.
Dr Tom Leighton is another boffin turned businessman: he is one of the
world’s foremost authorities on algorithms for network applications
and chief executive of Akamai, which offers cloud-based services to
online business customers, including the London Olympics last year, so
their sites run swiftly and securely.
`The London Olympics site had all sorts of attacks, but it did not go
down and it was not defaced. That was remarkable,’ Leighton says.
Outside the highly-educated elite, however, the country’s faith in the
American Dream – that anyone can achieve success if they just work
hard enough -has been badly shaken.
Ben Clarke, senior vice president at Luntz Global, which carries out
in-depth research into public attitudes, says: `Americans hear about
the recovery but they are still feeling recession. In Michigan and
Ohio, the stories about job losses are heart-wrenching.’
Ordinary Americans are, like their British counterparts, disgusted by
the banks. Luntz research shows that the term `CEO’ – chief executive
officer – `is toxic in terms of trust’.
`People don’t like regulation, except on Wall Street. They don’t like
the fact the bankers are getting away with it. There is strong support
for regulating CEO pay and top banker pay,’ he adds.
Almost six out of ten Americans believe the country’s best days are
behind it, with Republicans notably more pessimistic than
Democrats. More than half of Americans think it is harder for them to
achieve success than for their parents, and 72 per cent think it will
be more difficult still for their children.
The Woodstock-era baby boom generation has now gone grey, and more
than 40 per cent of Americans, Clarke says, expect to live until they
are in their eighties, so are worried about pensions and healthcare.
This, however, represents an opportunity for businesses such as Athena
Health, based in Watertown, a healthcare IT company offering
back-office services to doctors, who have to navigate the complex
Medicare and Medicaid systems. Its full-year revenues for 2012 grew by
30 per cent last year.
Despite the chastened mood that has followed the financial crisis, the
atmosphere has changed since a few months ago, when the world was
gripped by the fear that the nation would topple over the `fiscal
cliff’.
That fate was averted when politicians reached a last-minute
agreement. US stock markets have spent 2013 seeking out record highs,
and tested new peaks on Friday after better-than-expected jobs figures
eased concerns that the economy is heading into a slowdown.
Worries over joblessness, which remains at a high level, have also
been helped by the explicit commitment from Federal Reserve supremo
Ben Bernanke to make a priority of unemployment, and the figures for
April were much better than expected.
Even in manufacturing, which has, like heavy industry here in Britain,
seen a swathe of job losses due to competition from low cost labour in
developing countries, there are signs of hope.
Companies such as IPG Photonics, based in Oxford, Massachusetts are
trailblazers in advanced manufacturing. IPG, whose clients include
British engineer Rolls-Royce, makes high-performance lasers for a
wide-range of markets from telecoms to smoothing out the wrinkles of
Hollywood stars.
The company, which reported 15 per cent growth in revenues for the
first three months of this year, has lasers so precise they can etch
the entire Declaration of Independence, more than 1,000 words long, in
minuscule print on a piece of plastic the size of a credit card in a
matter of seconds.
Optimism is also returning to more traditional sectors such as the US
car industry, where two of the `Big Three’ – General Motors and
Chrysler – had to be rescued by the US government in the credit
crisis.
The auto industry has had its best sales in April for two decades,
according to a Bloomberg report, and there are hopes of a wider
manufacturing renaissance as a number of big manufacturers including
General Electric are `re-shoring’ jobs.
The potential for shale gas to make the country self-sufficient in
energy is one long-term factor likely to boost growth, as is the sheer
resilience of the American entrepreneurial spirit.
There are risks, not least that the US recovery could be derailed by
further turmoil in the eurozone.
But according to Daron Acemoglu of MIT, co-author of `Why Nations
Fail’ and one of the world’s leading economists, talk of the US being
toppled from its position as the world’s most powerful economy by
China is greatly exaggerated.
`China is in the ascendant and the US has a lot of problems,’ he
says. `So is this the end for the US? No. The future of the US is not
so bleak, because of entrepreneurship. There are challenges in terms
of political gridlock and economic and political inequality, but
democracies can generate solutions to institutional problems.’
What happens to the US economy matters to everyone, everywhere – and
as Acemoglu says, it is far too soon to start writing off Uncle Sam.